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Legal Snapshot: A Quick Overview (Part 4 of 4)

Exclusion waiver for “special circumstances.” The court does have discretion to waive this rule in the case of special circumstances. The law defines special circumstances to mean situations such as aserious medical condition or a call to active duty in the U.S. military. It remains to be seen if the courts will make rulings that broaden the definition of special circumstances to include such common misfortunes as a job loss, death of a spouse, and other serious misfortunes that disrupt or terminate a person’s ability to pay debts.

Bankruptcy terminology. The person who files bankruptcy is called the “debtor.” A case may be filed by an individual person, or a joint case can be filed jointly by a married couple. Every bankruptcy case is administered by someone called the trustee. A trustee is appointed by a branch of the U.S. Department of Justice to investigate the financial affairs of each person who files bankruptcy. The trustee has very broad powers to recover preferential transfers of money and other assets by an insolvent debtor, recover fraudulent transfers of assets, sell non exempt assets of the debtor, and even seek the denial of bankruptcy discharge or a dismissal of the bankruptcy on the grounds of debtor abuse. Every debtor is required to attend a hearing conducted by the trustee and answer questions under oath about their financial affairs. The trustee can require the debtor to supply copies of the debtor’s financial records, such as bank statements, cancelled checks and tax returns in order to aid the trustee to investigate the case. The trustee is paid with a portion of the debtor’s filing fee, plus additional compensation paid to the trustee out of assets recovered or liquidated by a trustee. The trustee is not a judge. Every bankruptcy case is assigned to a bankruptcy judge, who will make rulings if necessary if any type of controversy arises. Most cases are able pass thru the legal system without any controversy and will never be reviewed by a judge.

Filing fees and costs. The court charges a filing fee for each bankruptcy petition. At present, the filing fee is $299.00 for a Chapter 7 case, and $274.00 for a Chapter 13 case. Filing fees are subject to change, and can be determined from the web site of your local bankruptcy court. The web address of the Los Angeles Bankruptcy Court is http://www.cacb.uscourts.gov/ which always has current information on fees and links to all other Federal courts.

Duties of the debtor. Every person filing bankruptcy is required to submit and sign under penalty of perjury a very complex set of financial data called bankruptcy schedules, listing all debts, (even debts they intend to keep paying such as car payments and house payments), all assets of every kind, no matter what it is, no matter where it is, and certain other detailed information about the person’s financial affairs. The debtor is required to provide all of their income records for the prior 60 days. In addition, the debtor must appear and answer questions under oath at an examination conducted by the trustee, submit a copy of their most recent tax returns, (and in a Chapter 13 case copies of tax returns for the last 4 years) and submit a schedule identifying all secured consumer debts and stating how the debtor is proposing to treat those secured debts.

Differences between Chapter 7 and Chapter 13. To understand the workings of Chapter 13 and Chapter 7 and to understand why to select one chapter over the other, let’s first take a look at Chapter 7, see what it does, and see what happens in the typical Chapter 7. Then, we will compare it to the relief afforded under Chapter 13.

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